When the offer on your home is accepted, you’ll start the process of securing the mortgage for your home. Lenders will give you the option to lock or float your mortgage rate prior to closing (which typically happens 30 days after the offer is accepted).
“Locking” your mortgage means that you and your lender have agreed on an interest rate and price for your home loan. Once your loan is locked, that’s the rate and price you get, regardless of what happens in the financial markets. If rates go up, you’re protected; but if rates go down, you won’t benefit either — you close your loan at the rate you’ve locked and you can’t change it. Locks have expiration dates ranging from 30 to 60 days or more, and the longer your lock period, the more it costs. If you don’t close your loan on time, you could end up paying a higher interest rate.
Every day, LendingTree posts our recommendation (below) on whether you should lock or float your rate, so make sure to check back here prior to making your decision.
We are forecasting that mortgage rates might rise today, perhaps significantly. However, that prediction is based on early market trends, and those frequently change speed or direction during the day. So shallower rise, a holding steady, or a fall all remain possible. Still, if we were currently buying a home, we would lock our rate today. Read on to discover why you might prefer to float.
Our forecast could be undermined in coming hours by any economic, political, and geopolitical news that might affect the American and global economies. Today’s likely rise is largely driven by the U.S. Senate’s passing yesterday of a budget bill. This morning’s key, domestic, economic data comprised existing home sales, and those were better than expected. Also on today’s calendar are speaking engagements for two senior Federal Reserve officers, including a speech at 7:30 pm (ET) by Fed chair Janet Yellen.
Average rates for 30-year fixed-rate mortgages held steady yesterday, confounding our prediction that they might fall. They are now exactly half-way between the last month’s high and low points, but the difference between those extremes is very small. In other words, there has been very little volatility during that period. However, today’s possible rise could be relatively large. So those with only a short time to go before they have to lock may choose to do so now. If you have longer, you may prefer to carry on floating in the hope of seeing further falls, though that could prove a risky strategy.
What actually happens next will depend on whether relevant news becomes more or less positive in coming hours and days. Absent other factors, good news tends to push mortgage rates up, while bad news usually pulls them down. Nobody can be certain of the future, so you are taking a chance whether you float or lock. Only you can decide on the level of risk with which you are comfortable.
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